Global overcapacity drags oil prices down to six-month lows

Crude prices fell almost 4 percent on Wednesday, after US gasoline inventories rose unexpectedly and the International Energy Agency said it expects supply to outpace demand in 2018 despite consumption hitting 100 million bpd for the first time.

The U.S. Energy Information Administration (EIA) said gasoline inventories increased by 2.1 million barrels during the week ended June 9, while crude inventories decreased by 1.7 million barrels.

OPEC said oil inventories in industrialised countries dropped in April and would fall further in the rest of the year, but a recovery in US production was slowing efforts to get rid of excess supply.

It said the International Energy Agency has recently published a forecast, stating that the global refinery is expected to go up by 2.7 million barrels per day (bpd) between July and August with refineries processing nearly 82 million bpd for the same period.

Both the benchmarks, the Brent crude futures and U.S. West Texas Intermediate (WTI) crude futures were at were up 42 cents at $47.34 per barrel and $44.74 per barrel, up 28 cents, respectively.

Production across OPEC rose by about 336,100 barrels per day to 32.1 million bpd, according to secondary sources, led by increases from Libya and Nigeria, which are exempt from the deal, and Iraq, CNBC reported.

Parties to an agreement led by the Organization of Petroleum Exporting Countries to balance the market through managed production declines chose to extend the arrangement by three months into early 2018. Yet crude prices have slid about 12 percent since that day as other countries have boosted output. BP PLC said its latest research report that supply risks loom as reduced "investment spending on new energy projects over the past two years has not yet been fully felt".

Both crude oil benchmarks have lost all the gains made at the end of previous year after the oil cartel agreed with other big producers to cut output in an effort to prop up prices.

Global oil output will expand faster than worldwide demand for oil next year, primarily as United States producers rack up production, and that could hamper exporters' efforts to prop up prices, the IEAsaid Wednesday. "This looks challenging", AB Bernstein said.The International Energy Agency (IEA) said this week that oil supplies next year would still outpace demand despite consumption hitting 100 million bpd for the first time.

The oil market needs strong demand to help offset the rapid increase in supply.

OPEC, and some non-OPEC producers led by Russian Federation, agreed last month to extend supply curbs for nine months through to the end of March 2018.

Additionally, the International Energy Agency (IEA) said that the non-OPEC nations like Canada, Brazil and the USA will add about 1.5 million barrels of supply in 2018, which is higher than the expected demand growth of 1.4 million barrels.